Creating a spread betting behemoth has put Spreadex and Sporting Index in the crosshairs of the Competition and Markets Authority (CMA).
The CMA has the power to investigate any mergers or acquisitions that lessen the competitive nature of a sector, and they have confirmed that they’re running a fine toothcomb over the deal penned by Spreadex and Sporting Index in November 2023.
That agreement, which saw Spreadex acquire a controlling interest in Sporting Index after negotiating terms with their parent company Francaise des Jeux, is thought to have created something akin to a monopoly in the UK spread betting niche.
The duo have long enjoyed supremacy in the market, with competitors few and far between, which perhaps explains the surprise within the industry that the deal went ahead with relatively little fanfare.
But now the CMA have opened an investigation, and if they find that the acquisition is detrimental to the competitiveness of spread betting, they could uncork their arsenal of regulatory powers.
And those include blocking any merger that they believe taints a market, as they did back in 2019 with Asda and Sainsbury’s and before that when ITV and BskyB tried to merge forces in 2010.
Initiate Phase 2
When the CMA begins to investigate any merger or acquisition that brings into question the competitiveness of a sector, it all starts with an examinational Phase 1.
And if that uncovers a whiff of any misdeed, the governmental department will press ahead with a Phase 2 probe, which takes a deeper dive into a deal.
Referring to the case, the authority has confirmed: “The CMA decided that it was, or may be, the case that the above merger has resulted in a substantial lessening of competition (SLC) within a market or markets in the United Kingdom.”
And the CMA’s Naomi Burgoyne revealed as part of the Phase 1 investigation that the authority believes the deal will ‘give Spreadex a monopoly’. “It is important that customers can rely on competition in the market to keep odds competitive,” she said.
The government body has also since confirmed that Spreadex had chosen not to submit any undertakings to the authority, after they had raised potential issues over the deal – hence the escalation to Phase 2 status.
An inquiry group has been formed, who will have until October to decide whether the merger breaches government policy on the competitiveness of markets.
What is Spread Betting?
You no doubt are aware of traditional fixed odds sports betting – having a flutter on the football, horses etc at prices supplied by the bookmaker.
Spread betting is somewhat different, in that punters are looking for their selections to outperform a particular line provided by the operator – the more they do so, the greater their return.
The standard goal line for most English football matches is over or under 2.5 goals, with the bookies offering prices on there being two or fewer goals, or three or more.
But with spread betting, punters are looking to either ‘sell’ points on the line (e.g. under 2.5 goals), or ‘buy’ points that the market will be settled at a higher position (e.g. three or more goals).
In fixed odds betting, you might wager £10 on over 2.5 goals scored – your flutter will either win or lose.
But in spread betting, punters pay a price per unit – e.g. £10 per goal. So, if the case has four goals, they win £20 (four goals is two more than said line). But punters that sold the 2.5 line would lose £20.
Spreads are offered on stacks of different sports and bet types, with the potential for huge gains and losses in ‘large number’ markets, such as golf finishing positions. That explains why spread betting is so tightly regulated in the UK.
Not that exacting conditions have hampered Sporting Index’s progress. They were founded in 1992 and have been one of the major players in spread betting since, with success seeing them acquired twice by private equity groups.
Magnus Hedman, the iGaming entrepreneur, then paid £40 million for the outfit in 2015, before he too sold Sporting Index to Francaise des Jeux, one of the largest gambling operators in France.
Spreadex, meanwhile, were later into the game in 1999, when former city trader Jonathan Hufford decided to create a platform that would foster stock market techniques and psychologies but in sports betting.
By 2010, Spreadex were offering both spread and fixed odds betting, before picking up the customer databases of a number of trading firms that went bust in the subsequent years.
Estimates put the value of Spreadex somewhere in the region of £430 million.
